No hoax.
Alcohol turns to vapor (and even boils) at a much lower temperature than water. So while water absorbs a lot of the heat from the coals and hot shisha, alcohol does cool to an extent but a lot of it also turns to vapor (to be breathed in by you...).
Give it a shot and make your own decisions. If you want it to be enjoyable I'd dilute a good bit. If you just want to test the drunk-by-hookah theory, throw some cheap vodka or grain spirits in the bottom and smoke away...